China's influence in Syria goes beyond trade boom

China Mall, a store specializing in goods from China, in Bab Tourna, Damascus.

DAMASCUS // The warehouse looks like an economic dead zone, with old tyres littering the forecourt, smashed windows and grimy cinderblock walls. The grim exterior, however, hides a flourishing, multi-million dirham business of shipping Chinese goods into Syria. "We import anything, from laser cutting machines to plastic toys," said Mohammed Jarah. "There's a lot of demand in Syria for good value, good quality products and that's what we have."

Mr Jarah and his partner, Ahmad Bustati, set up the company in 2001 with a modest budget and a plan to import textile machines. After a slow start, the business took off and by 2005 it was bringing in Dh5.5 million (US$1.5m) worth of high-technology industrial tools annually. The expansion mirrors a broader trend that has seen China's role in Syria booming, as Damascus looks east for trading partners and political allies. While the US has been hitting Syria with tougher economic sanctions and European trade agreements have stalled, China has opened its doors for business.

"There has been a real change in the market in the last few years," Mr Jarah said. "When we started, it was more unusual and difficult for Syrians to do business in China but now everyone is doing it. Today, Chinese goods are number one here, not things imported from America or Europe." Syria and China have had diplomatic ties since the Chinese revolution in 1949. It is only since Bashar Assad, the president, visited Beijing in 2004 - the first Syrian premier to do so - however, that their economic relationship blossomed. Protective tariffs and red tape were slashed and trade grew sharply, from Dh36.7m in 2000 to Dh5.5 billion in 2007.

The true value of imports is higher, according to Syrian economists, who say that significant volumes of Chinese goods enter the country via Jebal Ali in the UAE, having been reboxed and relabelled with a different origin destination. Imports to Syria from within the Arab world are not subjected to high customs duties. "There are a lot of unofficial, off-the-books imports that are not counted as Chinese," said a Syrian trade analyst who spoke on condition of anonymity because of the sensitive nature of the subject.

From being a relatively small-scale exporter to Syria, China is now the country's largest supplier of imported products, ahead of Egypt, South Korea and Italy. Chinese direct investments in Syria have also expanded, including a joint Chino-Indian purchase of a Dh2.1bn stake in Syria's al Furat oil and gas company. The European Union remains Syria's largest single trading partner. With Damascus facing increased pressure from the West, however, that may be set to change. The United States and European Union accuse Syria of supporting terrorism in Iraq, Lebanon and the Palestinian territories. Syria denies the allegations.

"Trade between Syria and China has not reached really big numbers yet, but we are just at the beginning," said Safi Shuga'a, executive director at the Syrian Economic Centre (SEC). "Syria has been depending quite heavily on Europe but now Chinese goods are beginning to compete." Efforts by the Syrian authorities to move from a centralised, Soviet-style economy to a more free-market model, while retaining a strong grip on political power, have added to the close relationship. China's economy has changed radically in recent years without domestic political upheaval, a model Syria appears to be following.

"China is a socialist state and Syria has long adopted socialist ideas and the economies have been moving in similar directions," Mr Shuga'a said. "For that reason, there are close political and strategic ties between Damascus and Beijing." It is a policy that is paying off for Syria, according to Mr Shuga'a. "The balance of power shifts through time," he said. "It used to be the British, now we have America ... perhaps soon China and India will be the key powers so it's good for Syria to have strong ties with them.

"Surely the 'look east' policy has helped. If the US and its allies cut investments in Syria, Chinese investments will fill the gap." China maintains a permanent economic mission in Syria, with staff monitoring trade flows and organising business networks. "They are very active," said Firas Jijakli, deputy general director at the Syrian Chamber of Commerce. "If they see imports in a certain product are falling, they're on the phone straight away to find out why and to see if there is anything they can do to reverse it."

Mr Jijakli predicted further growth in Syria's imports from China, something he warned may hurt domestic firms. "Growth will bring advantages and disadvantages," he said. "We don't want to just be importing finished goods, we want to be entering partnerships with Chinese firms so they are manufacturing products here." Liu Bo, second secretary at China's Economic and Commercial Counsel in Damascus, said she expected "significant" increases in Syrian Chinese trade, with a change in product types. "At the moment we largely export low price, low value goods," she said. "We want to export more high technology products and services."